Business groups link up to encourage quick payment

Business groups including the CBI, British Chambers of Commerce and British
Venture Capital Association have joined forces to encourage their members to
make a commitment to pay small suppliers on time.

Business Minister Mark Prisk, who brokered the agreement, said there needs to be a “culture change” so that being a late or slow payer carries a reputational risk for big companies.

Twelve of the UK’s largest business bodies – members of the Government’s Small Business Economic Forum – have agreed to advise their members to sign the Prompt Payment Code (PPC), a voluntary scheme that promotes good payment practice.

The scheme is designed to tackle what small business organisations have identified as the UK’s “chronic” late payment problem – small and medium-sized firms are owed £35bn in unpaid bills, according to the payment processing firm Bacs.

Business Minister Mark Prisk, who chairs the group, called the agreement a “significant step forward”.

“This is an endemic problem that gets worse when there’s a downturn.” He said there needs to be a “culture change” so that being a late or slow payer carries a reputational risk.

The business groups will also tell their members to proactively agree payment terms before delivering orders; raise complaints over late payment from PPC signatories and use existing legislation to pursue late payers. However, Mr Prisk has admitted that legislation which allows suppliers to charge interest on overdue invoices “hasn’t worked” because small companies are reluctant to jeopardise a trading relationship with a large customer. “Just passing laws won’t solve the problem.”

Encouraging firms to agree terms is key, Mr Prisk said, since “more than half of business-to-business transactions have no pre-agreed terms”.

While the PPC includes a commitment to pay suppliers within the terms of a contract and without changing payment terms retrospectively, it does not tackle the issue of slow payment, where large companies use their negotiating power to encourage suppliers to agree to payment terms of 120 days or more.